Peru’s aviation market remains on a sound footing despite overall weakness in Latin America
Peru is one of the more promising regions in Latin America during 2015, reflected in positive GDP growth and the addition of new international service. The domestic market is still growing at a solid pace, with Peruvian Airlines making significant market share gains.
During 1H2015 Peruvian transported slightly more domestic passengers than the Avianca Group, achieving the same level of market share as Avianca.
It appears that the Avianca Group may be working to leverage more international connections from Lima as the airport continues to serve as a key hub for the company. Avianca rival LATAM has also been working to exploit connections through Lima to North America and the Caribbean, and also plans frequency increases to some of its South American hubs from Lima during early 2016.
Overall the Peruvian aviation markets seems relatively stable compared with some of the other lager markets in Latin America; but Peru cannot entirely escape the economic cloud hanging over Latin America even as it boasts one of the more stable economies in the region.
Peruvian Airlines makes market share strides in the Peruvian domestic market
According to data from Peru's DGAC, the country posted total passenger growth of 8.6 million during 1H2015, a 10% increase over the year prior. International passenger throughput increased 6.8% to four million. Peru's domestic passengers increased 12.7% year-on-year to 4.6 million.
Growth in Peru's domestic market slowed to 8% in 2014 to 8.9 million from double digit growth in the years prior. The country's domestic aviation market grew 17% year-on-year in 2012, and 15% in 2013.
Avianca, which previously operated as TACA Peru prior to the rebranding that occurred after the Avianca-Taca merger, started making a push in the Peruvian domestic market in 2011. Previously, it had only operated one domestic route - Lima-Cuzco. By 2012 Avianca had achieved a 12% domestic market share, overtaking Star Peru to become the country's second largest domestic airline.
See related report: TACA continues expansion in Peru with A330s ahead of rebranding as Avianca
In 2014, Avianca posted a 13% market share, but Peruvian Airlines had moved up in the standings with a 12% share. Peruvian launched operations in 2009, and operates a fleet of Boeing 737 Classic aircraft. It primarily focuses on domestic operations, but operates international flights from Iquitos to Cochabamba, Cuzco to La Paz and Lima to Santa Cruz (according to schedules from CAPA and OAG for the week of 31-Aug-2015 to 6-Sep-2015).
DGAC data show Peruvian's domestic market share reached 13.4% in 1H2015, surpassing TACA's 13.2%. Peruvian transported 619,375 passengers compared with 611,646 for Avianca. LAN Peru remained the market leader at 62%, Star retained a 6% share and LC Busre had a 3% share.
Domestic passenger market share among Peruvian Airlines: 1H2015
| LAN Peru | 62% |
| Peruvian | 13% |
| Avianca | 13% |
| Star Peru | 7% |
| LC Busre | 3% |
For now Avianca seems to have reached a steady state in the Peruvian domestic market, serving many of the large domestic routes and leveling off its passenger growth. After logging 28% passenger growth year-on-year in 2013 to 1.2 million passengers, its growth was flat in 2014 at 1.2 million passengers.
Peruvian crossed the one million passenger threshold in the domestic market in 2014, after transporting 88,502 domestic passengers in 2013. LAN Peru's domestic passengers increased 7.6% year-on-year in 2014 to 5.7 million and Star Peru's passenger numbers notched down 0.4% to 624,680.
Avianca's international passenger growth to Peru slows after rapid jumps in years past
Avianca serves major domestic routes in Peru including Lima to Arequipa, Cuzco, Iquitos, Juliaca, Piura and Trujillo. It also offers service from Cuzco to Arequipa and from Puerto Maldonado to Cuzco. (based on schedules from CAPA and OAG for the week of 31-Aug-2015 to 6-Sep-2015)
Those domestic flights in part feed Avianca's international service from Lima that includes Asuncion, Bogota (an Avianca hub), Buneos Aires, Cali, Caracas, Guayaquil, La Paz, Montevideo, Santa Cruz, San Salvador (an Avianca hub), San Jose (an Avianca hub), Miami, Medellin, Quito and Punta Cana.
Avianca's international passenger growth in the Peruvian market jumped 25% year-on-year in 2013 to 1 million, but slowed to 5% in 2014 to 1.1 million. The company remains the second largest airline measured by passengers carried, represented a 13% share in 1H2015. LAN Peru retained the largest market share a 32%, transporting 1.2 million international passengers during 1H2015. LAN Airlines posted a 10% share, Copa had a 5% share and American held a 4% share.
International passenger market share among airlines serving Peru: 1H2015
| LAN Peru | 32% |
| Avianca | 13% |
| LAN | 10% |
| Copa | 5% |
| American | 4% |
| KLM | 3% |
| Iberia | 3% |
| Other | 30% |
LAN Peru charts international growth from Lima in late 2015 and early 2016
LAN Peru's international passenger growth to Peru jumped nearly 15% year-on-year in 2013 to 2.5 million passengers, but slowed to a 4% increase in 2014.
LAN Peru has undertaken more international expansion from Lima in 2H2015, with new flights to Orlando launched in Jun-2015. That service joins LAN Peru's existing US flights to Los Angeles, Miami and New York JFK. LAN Peru is part of the LATAM Airlines Group, which for the last couple of years has stated its intent to leverage Lima as a North-South connecting point for Latin America.
The company has also stated that it plans to add some capacity from Latin America to the Caribbean, and during Jan-2016 LAN Peru is adding frequencies from Lima to Cancun and Punta Cana as well as to LATAM hubs in Santiago and Sao Paulo.
LAN Peru is also planning to introduce new flights from Lima to Montevideo in Jan-2016, increasing competition with Avianca. In late 2015 LAN Peru also aims to launch flights from Lima to Antofagasta, Chile.
Lima secures a key route from London with new British Airways flights
Lima Jorge Chavez International Airport has secured a key long haul route after British Airways declared it would launch flights from London Gatwick in May-2016. The airline is offering three weekly flights during the summer high season, and reducing to twice weekly in Oct-2015. Given Peru's status as a sought-after tourist destination, the route has reasonable potential for success.
British Airways can also tap the extensive domestic network of LAN Peru, a fellow oneworld alliance member, as well as the South American network of the LATAM airlines group.
Presently, British Airways serves three South American markets from its London Heathrow hub - Buenos Aires, Rio de Janeiro and Sao Paulo Guarulhos. Other airlines operating from Europe to Lima include Air France from Paris, Iberia from Madrid and KLM from Amsterdam.
Peru's economy is one of the more stable in the generally shaky Latin American market
Another incentive that British Airways cited in launching flights to Lima was providing a link for British businesses aiming to invest in Peru's growing market.
Presently, Peru is one of the more stable economies in Latin America. Its projected GDP growth of 3% in 2015 is better than projections of 2.7% growth for Chile and is on par with forecasted 3% growth Colombia. Both Brazil and Argentina have forecasts of negative GDP growth in 2015.
Although LATAM cited a 11.3% depreciation of Peru's currency in 2Q2015, recently the PEN gained some strength against the USD as the Peruvian government took steps curb further declines, according to news outlet Bloomberg. However, Peru will no doubt feel some effects of weak economies within Latin America, whose GDP is is forecasted at just 1% growth in 2015. Slower growth in China is also wreaking havoc on global economic markets, and Latin American will also feel the reverberations from China's economic weakness.
Peru's aviation remains on a solid foundation, with untapped potential from Lima
It is not surprising that growth in Peru's domestic aviation market has slowed after years of exponential passenger increases. However, the country's domestic aviation industry is still charting strong growth, and opportunities remain for the airlines serving the country.
Given the tenuous state of the overall Latin American aviation market, Peru arguably remains on solid footing, with still untapped potential to leverage Lima as a key connecting point to lower South America.